Financial News

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The FTSE 100 looks doomed to end the week on a down note as fears spread for the knock-on effect of a huge debt default in Dubai.

The London market shed another 1.5% on opening before stabilising at a more moderate deficit.

The index fell 3% yesterday - wiping £44bn from blue-chip stocks - after Dubai World, the emirate's main development engine, said it was asking creditors to delay paying back its £37bn debt.

The banks were in the firing line as investors worried about how exposed they were to bad debts in the emirate.

Asia also took a hit overnight as Hong Kong's Hang Seng fell more than 5% and Japan's Nikkei moved 3% lower.

Wall Street, which was closed yesterday for Thanksgiving, also looks set to tumble when trading resumes later today.

The shock from Dubai - exacerbated by a lack of clarity on its financial position as the city-state closed down for the Eid al-Adha religious festival - has raised fears of a broader fall in store for the world economy.

But Prime Minister Gordon Brown said the events in Dubai were a "setback" and would not knock the global recovery off course.

He added: "I think we are going to have issues like this at different points and different times, because of the fallout from what has happened over the last two years.

"But my own view is that the world financial system is stronger now and able to deal with the problems that arise."

David Buik, of BGC Partners, said the major impact of developments in Dubai came from the uncertainty they caused.

But he warned against drawing long-term conclusions.

"It's a wake-up call and we always knew it was going to be around the corner - markets are frightened.

"I don't see this as a major problem; I see it as setback."